Enforcement lawyers at the Securities and Exchange Commission are reviewing documents that detail the companies’ relationships with the Libyan Investment Authority, which is controlled by Moammar Gadhafi, sources told the Journal. Among other things, the SEC is specifically interested in a $50 million fee Goldman initially agreed to pay as part of a proposal set up to help the LIA recoup losses.

Goldman didn’t end up paying, as talks stalled before the February uprising in Libya. But just because Goldman didn’t pay doesn’t mean the company is exempt from the Foreign Corrupt Practices Act, which bans bribery to foreign officials for business purposes. Employees of sovereign-wealth funds count as foreign officials under the law.

“We are confident that nothing we did or proposed was or could have been a breach of any rule or regulation,” said Lucas van Praag, a Goldman spokesman. The SEC declined to comment to the Journal.

The SEC’s interest in the documents doesn’t necessarily mean it will launch a formal investigation, the Journal noted.

Goldman’s talks about the fee came after the LIA gave the company $1.3 billion to place an assortment of bets; the investment lost 98% of its value. In return for winding down the trades and a release of liability, Goldman offered to pay transaction fees and an additional $50 million payment, which would have been turned over to an outside advisory firm that was then run by the son-in-law of the Libyan national oil company, according to documents reviewed by the Journal.

Goldman said it would make the payment if the deal satisfied “Foreign Corrupt Practices Act representations as set out in the Terms Letter,” among other conditions, according to the Journal.

Several other financial firms were revealed to have taken a broad interest in doing business with the LIA once it launched in 2007, and current and former officials at the sovereign-wealth fund told the Journal that some of them used middlemen as part of doing business with Libya.

The inquiry, the Journal reported, is separate from the broader ongoing investigation into financial firms’ dealings with sovereign-wealth funds.

About Corruption Currents

Corruption Currents, The Wall Street Journal’s corruption blog, digs into the ever-present and ever-changing world of corporate corruption. It is a source of news, analysis and commentary for those who earn a living by finding corruption or by avoiding it. Corruption Currents is written by Christopher. M. Matthews and Sam Rubenfeld and edited by Nick Elliott.

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